Eliminate Debt In 7 Simple Steps

Having a lot of debt to pay can be very troublesome. Credit card debt as well as other forms of debts is actually a big issue especially in the United States. For example, most people who have credit cards still have balances to pay. And these balances even have an interest rate of 10%-30% APR.

If you would like to get out of debt, then you are on the right page. You should read the rest of this article in order to stop amassing more debt and to start paying them one by one.

Write down everything you have spent for a day; this is the best way to keep track of what you are spending. Every single day, you have to write down everything you have purchased or paid for. This will help you check if you are spending more than your required budget for a particular day.

Avoid amassing more debt.

Cut down all of the credit cards that you have. Only one credit card should remain. And this credit should only be used to buy during “emergencies.” The remaining credit card should only be used to purchase thing you are capable of paying off in a short amount of time.

Divide your spending into categories.

You should categorize your spending into “Major Necessities,” “Minor Necessities,” and “Wants.” Your major necessities refer to the things you really need. If they are not purchased, it can lead to harm. Examples of major necessities are food, medicine, and rent. Minor necessities are those which you might need but can be put for a while. Examples of which are new clothing and gym membership. “Wants” refer to the things you can live without; however, they can enhance your life. These include cable tv, and magazine subscriptions. You should focus on paying for the major necessities and cut back on the minor necessities as well as your wants. Doing so can greatly reduce your bills.

Budget your money.

Figure out the monthly amount needed for paying your major necessities. If possible, just allot a small amount of money for minor necessities and wants. However, you should still have savings of at least 10%-40%. The key here is to pay for the things you “need” and not on the things you “want.”

Organize your debts.

You should write down how much you owe, to whom, and on what particular terms. Write down all your debts on a list and include facts such as the name of the creditor, minimum monthly payments, and interest rates. If possible, rank them in order of their due date, with the most recent at the top.

Pay off your debts.

Paying only for your needs will really help you cut back on costs. Now, with the savings you have each month, you can start paying for your debts.

For example, after cutting back on expenses, you can now save $300 each month. You should now allot this $300 on paying off your debts. If, for example, you owe $1000 with a 20% interest rate, and another $1000 with an interest rate of 10%, and another $25,000 on student loans with an interest rate of 5%, then you should start paying off those with a high interest rate. What we mean is, you should allot 50%-75% of your savings on debts that have higher interest rates. The remaining of which should be allotted to those who have lower interest rates.

Repeatedly enhance your spending habits.

By enhance, we mean, to continuously change for the better. You should enhance your spending habits month after month and enhance your savings especially if you still have bills to pay. Finally, after you have paid all of your debts, continuously save for the rainy day. In this way, you won’t have to incur debt again when an emergency situation arises.

Roger is a passionate writer of personal finance articles. He offers advice to people regarding personal home loans, fast loan, solving financial problems and settlement loans. He is fond of adventure sports and watching football when away from work.

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